What Do Florida Laws Say About Unspent Money?

Richard D. DeBoest II Esq.

Editor’s Note: Lawyers for Goede, DeBoest & Cross answer questions about Florida community association law. The firm represents community associations throughout Florida and focuses on condominium and homeowner’s association law, real estate law, civil litigation, estate planning and business transactions.

QUESTION: Are there any differences between Florida Chapter 720 and 718 laws as to what HOAs and condominium associations can do with unspent money from specified project evaluations? Are they obliged to return these sums to their owners, can they put them in the general fund, use them for another contribution or for another use? Thank you.

– TC, Treasure Coast

RESPONNSE: When you say evaluations for specific projects, I assume you mean special evaluations adopted by the board outside of the normal budget for a particular project. In such cases, section 718.116 (10) for condominiums and section 719.108 (9) for co-ops both provide that “funds collected under a special appraisal are to be used only for specific purposes. set out in this notice. However, once such specific objective (s) are completed, any excess funds will be considered a common surplus and may, at the discretion of the board, either be returned to the owners of the unit or applied as a credit for future appraisals.

Chapter 720 for Homeowners Associations does not contain this provision, so you should check your governing documents to determine if they dictate what needs to be done for the excess. If the documents are silent, the board would then decide to return the surplus to the owners, place it in operating or reserve accounts, or use it for other appropriate purposes.

If, however, you mean in the ordinary annual budget that there is a budget line for a particular project and at its conclusion there remains a surplus, then in such cases the statutes do not dictate what you have to do with those funds, and your documents are unlikely to either. Thus, generally, this surplus would be kept in the operating account and then transferred at the end of the year to the next annual budget. But the board could choose to return the operating surplus, but I don’t think that’s the usual practice.

QUESTION: What are some of the possible changes to the law that could be made as a result of the Champlain Towers South building collapse?

– LZ, Delray beach

RESPONNSE: In the aftermath of this tragedy, the Florida Bar formed the Advisory Working Group on Personal Safety in Condominium Law and Policy. The task force’s mission was to review condominium and other laws and suggest changes that would help prevent future accidents. On October 12, the task force released its report containing numerous recommendations. Below I will highlight some of the proposed changes that are intended, for now, to apply to condominiums and “high rise” co-ops which are defined as buildings of three or more storeys.

  1. Imposing a mandatory maintenance schedule for certain critical infrastructure components and thereby removing some of the board’s discretion to postpone necessary maintenance and repairs.
  2. Eliminate provisions in the governing documents that require unit owner approval for a board to impose a special assessment or borrow money to fund necessary maintenance and repair projects.
  3. Impose a non-waivable engineering study every five years of critical infrastructure components that is much more in-depth than a typical standby study. The study should answer certain questions on a standardized form. The report should be prepared by an engineer or architect.
  4. Require that the five-year report be posted on the association’s website and provided to all potential buyers of units.
  5. Allow owners to sue the association if it does not produce the five-year report.
  6. Establish non-transferable reserves or only 50% of non-transferable reserves for certain critical infrastructure components. Add “waterproofing” as an element of the legal reserve. Require 75% of owners present and voting to waive or reduce reservations as opposed to the current majority of those present and voting.
  7. Eliminate pooling of funds allocated to reserves of critical components.
  8. Prohibit the state from taking the annual fee of $ 4 per door paid to the Condominium Division and using it for other non-condominium or co-op purposes.
  9. Provide means beyond traditional loans and special assessments to raise funds for necessary infrastructure maintenance and repairs, such as low interest government guaranteed loans and the creation of similar special tax districts to a municipal services taxation unit.
  10. Eliminate the ability of the community association manager, management company and other professionals to avoid liability for bad advice by using indemnity clauses in their contracts.

Keep in mind that these are only task force recommendations, and what the legislature actually enacts could be and likely will be different. Nonetheless, it goes without saying that some reforms are needed to prevent future tragedies like the one at Surfside.

Richard D. DeBoest II, Esq., Is co-owner and shareholder of the law firm Goede, Adamczyk, DeBoest & Cross, PLLC.

Richard D. DeBoest, Esq., Is a partner at the law firm Goede, DeBoest & Cross. Visit www.gadclaw.com or to ask questions about your issues for future columns, send your request to: [email protected] The information provided here is for informational purposes only and should not be construed as legal advice. The publication of this article does not create an attorney-client relationship between the reader and Goede, DeBoest & Cross or any of our attorneys. Readers should not act or refrain from acting on the basis of the information in this article without first contacting a lawyer, if you have any questions about any of the issues raised here. Hiring a lawyer is a decision that should not be based solely on advertisements or this column.

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